Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Circular No. 1024/12/2016–CX
New Delhi, Dated the 11th April, 2016
To
All Principal Chief Commissioner / Chief Commissioners of Customs, Central
Excise
& Service Tax;
All Director Generals of Customs, Central Excise & Service Tax;
All Principal Commissioners/ Commissioners of Customs, Central Excise & Service
Tax;
Webmaster, CBEC
Subject:- Clarification regarding re-refined used or waste-oil – reg
Madam/Sir,
References have been received regarding excisability of re-refined used oil or
waste oil. Various units are engaged in re-refining of waste oil or used
lubricating oil collected from the transformers, service stations of vehicles
etc. The matter has been examined.
Process
- Used Oil contains impurities and contaminants such as moisture, diluents,
sediments, metal particles and carbon. In refining units, waste or used oil
undergoes
various process such as dehydration-for removal of moisture, distillation-for
removal
of diluents, clay polishing- for removal of carbon by adsorption process,
filtration-for
removal of the clay and the dissolved carbon to render it usable. The oil so
obtained
from such waste or used oil is packed and sold as base oil, lubricating oil and
transformer oil etc. to the consumers for further use.
Classification
2.1 “Waste oil” has been defined in note 3 of chapter 27 of First Schedule of
Central Excise tariff Act, 1985 as waste containing mainly petroleum oils and
oils
obtained from bituminous minerals, whether or not mixed with water. These
include:
(a) such oils no longer fit for use as primary products (for example, used
lubricating
oils used hydraulic oils and used transformer oil);
(b) sludge oils from the storage tanks of petroleum oils, mainly containing such
oils
high concentration of additives (for example, chemicals) used in the manufacture
of
primary products; and
(c) such oil in the form of emulsions in water or mixtures with water, such as
those
resulting from oil spills, storage tank washing, or from the use of cutting oils
for
machining operations.
2.2. Under Central Excise tariff heading 2710, there are three headings or
subclassifications
at the single dash (-) level. The first of the three heading at single dash
(-) level deals with petroleum oils and oils obtained from bituminous
minerals……….etc. other than those containing bio-diesel and other than waste
oil.
Second heading at this level deals with those containing biodiesel other than
waste oil
and the third heading is meant for waste oil. Waste oil is further divided into
two subclassifications
at eight digit level, with two dash (--), namely 27109100 and
27109900. Waste oil is classifiable in either of them depending upon its
composition.
Lubricating oil on the other hand is classifiable under CETH 27101980, a heading
specifically covering lubricating oil.
- It may be noted that used lubricating oil collected from service stations is
not
fit for use as primary products and will therefore be classified as waste oil
whereas
processed waste oil, which becomes fit for use as lubricating oil and would
qualify as
primary product, will be classified as lubricating oil.
Manufacture
- Waste oil after processing may become lubricating oil but this process would
not amount to manufacture in view of the judgement of tribunal in case of
Collector vs
Mineral Oil Corporation [1999(114) ELT 166] upheld by Hon’ble Supreme Court
[2002(140) ELT 248(SC)]. However, the issue also needs to be examined in light
of
chapter note 4 of chapter 27 which was inserted in the Central Excise Tariff by
the
Finance Act of 2000.
- 5.1 Chapter note 4 of chapter 27 is a deeming fiction on manufacture and
provides
that:-
“In relation to the lubricating oils and lubricating preparations of heading
2710, labelling or re-labelling of containers and re-packing from bulk pack to retail
packs
or the adoption of any other treatment to render the product marketable to the
consumers, shall amount to manufacture”
5.2 This chapter note applies only to “lubricating oils and lubricating
preparations
of heading 2710”. Other goods falling under CETH 2710 are not covered by the
chapter note. The deeming fiction provides that when one of the process listed
in the
chapter note is carried out on lubricating oil or lubricating preparations, it
shall be
deemed to be manufacture. These processes are-
(i) labelling or re-labelling of containers,
(ii) re-packing from bulk pack to retail packs,
(iii) adoption of any other treatment to render the product marketable to the
consumers.
55.3 Thus for a re-refining unit, the test for levy of Central Excise duty is
whether
the lubricating oil (produced from the waste oil) has undergone any of the
process
listed in chapter note 4 of chapter 27 as explained above (paragraph 5.2). Where
such
process has been carried out, it would amount to manufacture and Central Excise
duty
would be leviable.
Application
- A unit processing waste oil or used oil would need be examined in above light
to decide whether the process undertaken by them amounts to manufacture. Where
the
process amounts to manufacture, Central Excise duty is payable. The issue is
interpretational in nature and therefore where a demand is raised pursuant to
this
circular, it should be raised for normal period of limitations only. SSI
benefit, where
admissible, should be extended.
- Field formations and trade may be informed suitably. Difficulty experienced,
if
any, in implementing the circular should be brought to the notice of the Board.
Hindi
version would follow.
(Santosh Kumar Mishra)
Under Secretary to the Government of India
F. NO. 96/43/2015-CX.1
|